Piet Viljoen writes;
Many financial commentators are warning of a financial tsunami for South African investors, given the prospects of a credit downgrade. The gist of what many commentators are saying, following the deterioration of the South African economy during Zuma’s destructive tenure, is:
- South Africa faces an imminent rating downgrade by Moody’s to junk status;
- That this is a result of a declining commodity cycle, government corruption and commensurate out-of-control spending, and
- Despite this, many economists insist on viewing the state of affairs through rose-tinted glasses;
- The rand has collapsed over the past 10 years, but Regulation 28 has precluded SA investors from moving enough money
offshore to “benefit” from rand weakness;
In short, we do not disagree with these views. Where we do differ, is on the investment implications thereof. The main reason for this is that, in our opinion, markets have already priced in much of the downside. After all, markets are a discounting mechanism – market prices are simply a summation of their participants’ views. And South African market participants have rarely in history been as negative as they are now.
Read on in the document below.